DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: Mixed Live Equiv $150.37 + .01* 
Hogs: Steady Futures: Mixed Lean Equiv $ 86.67 - .14**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle market watchers are not likely to be very stressed Tuesday as bids and asking prices remain poorly defined. Our guess is that bullish-minded feedlot managers will start out pricing ready steers and heifers around $130 in the South and $212 to $214 in the North. Significant trade volume will probably be delayed until Wednesday or Thursday. Live and feeder futures should open on a mixed basis with traders ambivalent about immediate price prospects.

The cash hog trade seems readyto open generally steady Tuesday. Monday's trade was a bit surprising in the way it sported a firm undertone. Perhaps buyer's sense numbers tightening up a bit over the next several weeks. Lean futures are staged for a mixed opening tied to spillover selling and short-covering.

	BULL SIDE		BEAR SIDE
1)	China and the EU (among others, see story below) have declared at least a temporary ban on Brazilian beef after a scandal involving tainted product treated with chemicals. Should the scandal and international reaction accelerate, U.S. exporters could benefit from old Brazilian customers looking for new sources.	1)	Though new showlists distributed on Monday looked mixed in size (i.e., larger in the South, smaller in the North), the overall offerings appear to be greater than last week.
2)	Live cattle open interest continues to build on higher prices, suggesting active buyer interest in the board's deep discount to feedlot cash.	2)	Spot April live futures continue to buck overhead resistance at the January high near $120 while actively traded June continues to encounter similar resistance near $110.
3)	Ongoing proliferation of case of bird flu around the word could work to promote the demand and consumption of pork.	3)	Lean futures remained on the defensive Monday with spot April close below its moving average low for the first time in two weeks.
4)	This week's Cold Storage report (to be released on Wednesday) is expected to supply further evidence of outstanding export demand (i.e., through unusually low frozen stocks).	4)	Hog futures will likely chop around until such time a clearer picture develops with respect to demand moving forward, given the ample hog supply picture going forward.

OTHER MARKET SENSITIVE NEWS

CATTLE: (AP) -- Brazilian authorities scrambled to contain the fallout from a police sting that has raised questions about the safety of the nation's meat industry, as more countries said they planned to suspend imports due to sanitary concerns.

China, the biggest buyer of Brazilian meat, along with South Korea, the European Union, Egypt and Chile took steps to ban imports from either Brazil or those companies accused by Brazilian federal police Friday of bribing sanitary officials for health certificates. Among the dozens of companies targeted are some of the world's biggest producers and exporters of chicken and beef, including JBS SA and BRF SA.

Both companies have denied selling bad meat or bribing officials.

Brazilian officials fear police allegations that meatpackers peddled rotten, salmonella-infested products could hurt one of the country's most vibrant industries at a time when the economy is fighting to recover from its deepest recession on record. Brazil is the world's second-largest producer of chicken and beef, trailing only the U.S., and meat products are among its top exports.

Both here and abroad, consumers expressed concern about the allegations. "We've been cheated if all of this is true," said Patricio Buccioni, a 68-year-old taxi driver in Santiago who often buys Brazilian beef at the supermarket. Asked whether he will continue doing so in the future, Mr. Buccioni said, "I'm going to be more careful."

GPA, Brazil's largest retail group, said in a note that it is watching the scandal closely and "repudiates any practice that puts at risk the health of its customers." The firm added that its supermarkets conduct internal monitoring to guarantee the quality of their meats.

The investigation, dubbed "Weak Flesh," took Brazil's leaders by surprise and left them walking a fine line as they sought to calm consumers and trade partners without appearing dismissive of the findings.

"Agribusiness for us in Brazil is an extremely important thing, and it must not be devalued by a small nucleus," President Michel Temer said Monday in a speech at the American Chamber of Commerce in São Paulo.

Mr. Temer has been huddling with regulators, meat producers and foreign officials to discuss the probe and reassure them that Brazilian meat is safe. After a day of back-to-back meetings Sunday, the president treated 19 ambassadors and eight foreign trade officials to dinner at Steak Bull, a plush, all-you-can-eat grill near the presidential palace.

Mr. Temer's office said Sunday night that all the meat served at the dinner was of Brazilian origin, after local media outlets reported that the restaurant specializes in imported cuts.

In a Twitter video featuring uplifting music and scenes of green pastures, Mr. Temer said Brazil's meat producers have "won over consumers and obtained approval from the most demanding markets in terms of enforcement." Agriculture Minister Blairo Maggi, himself the owner of huge tracts of farmland in Brazil's interior, said that "the vast majority" of government workers are trustworthy and that only 21 of the country's 4,837 meat plants are under investigation.

Talking to reporters on Sunday, Mr. Maggi said the government supported the investigation but he criticized the federal police for not clarifying some information with the ministry. For instance, police highlighted the use of meat from pigs' heads in sausages, a practice Mr. Maggi said is in fact legal in Brazil.

And some meat-loving Brazilians shrugged off the concerns.

"Monday, I had a barbecue with my family and friends," said José Molina, a 57-year-old advertising worker, while preparing for a meat-heavy lunch at a São Paulo steakhouse. "I think there's exaggeration and that the situation will go back to normal soon."

But several governments around the world expressed worry about the allegations, and industry officials were bracing for further restrictions from export markets.

China informed the Brazilian Agriculture Ministry on Monday that it will ban meat imports from the South American country until Brazil's government explains the situation. Mr. Maggi was scheduled to hold a videoconference with Chinese authorities on Monday night to "provide clarification," the Brazilian ministry said.

China imported nearly $2 billion of meat products from Brazil last year.

Enrico Brivio, spokesman for public health and food safety at the European

Commission, said Monday during a news briefing that the bloc is moving to suspend imports from "any of the establishments implicated in the fraud."

"We've asked our member states to remain vigilant and increase...controls on meats coming from Brazil," Mr. Brivio said, referring to "documentary and physical checks."

The Agriculture Ministry of Chile, one of Brazil's top-10 export markets, said on Twitter that it had suspended imports of Brazilian beef until it received further details.

South Korea's Ministry of Food and Drug Safety said it wouldn't allow chicken already imported by BRF to be sold or circulate in the country. And in Finland, the food safety authority said it had launched its own investigation.

Egypt temporarily suspended imports of poultry and other meat from Brazil pending a response from the Brazilian Embassy in Cairo to questions sent by the local authorities, Agriculture Ministry spokesperson Hamed Abduldayem said.

BRF said Monday that it hasn't been officially notified by foreign or domestic authorities of any suspension by countries where it does business.

Industry officials sought to play down the scandal by calling the police's conclusions into question. Antonio Jorge Camardelli, head of beef exporters' group ABIEC, said in a news conference Monday the police based some of their allegations on technical mistakes, saying an "unnecessary crisis" had resulted.

The biggest questions going forward are how many more countries will move to restrict Brazil's meat exports, and for how long.

Neil Shearing, chief emerging markets economist at Capital Economics, said that while it is too soon to know the full impact, the scandal could "plausibly derail the country's economic recovery" if it continues to grow.

"It goes without saying that this is the last thing that Brazil's economy needed," Mr. Shearing said.

HOGS: (CNS) -- Inexpensive feed and a softer Canadian dollar have helped keep Canadian hog prices aloft in 2017.

"Right now producers are looking at C$180 to $184 a pig," said Andrew Dickson, the general manger of Manitoba Pork. "Prices are looking pretty good for June, July, August."

He says by July producers could see $200 per animal, which he described as strong overall and similar to 2016 values.

"The previous year, March of 2015, you were looking at July prices of $166 to $171," he said.

He estimates 60 percent of the cost of raising a pig is feeding it, so the low cost of corn and other feed this season has been one of the main drivers in the market.

He cautions producers won't necessarily be able to use the crop that was not harvested last fall. A few million tonnes of grains and other crops are waiting to be threshed this spring. Many expect much of it to wind up in Prairie feedbins, but Dickson says it's not that simple.

"We can't use high fusarium levels in pigs. It's an appetite suppressor," he said. "That's the last thing you want in a pig."

Many producers on the Prairies are trucking their weanling pigs into the U.S. to finish them.

"They're selling them to American farmers who use their own soymeal and corn. The big thing for corn growers is they love the manure," he said.

Dickson says he has heard comments that the manure is giving producers a 10-percent yield boost, which exceeds most fertilizers. So, by that metric it's good for both sides.

"If you're in Iowa and you're growing a crop and you get a 10 percent (yield) increase, that's roughly 20 bushels an acre," he said.

However, the potential for spring flooding in Manitoba is one threat that could gum up the works for those near rivers.

"There are lots of pork operations near the Red River," Dickson explained.

Despite that he's confident producers will be able to protect their operations.

"We've had floods in the valley since the 1970s," he said.

"Guys have built up berms around their operations and storage facilities, they've figured out how to cope with this."

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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